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  5. Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market

  • Lutz Kilian
American Economic Review
vol. 99, no. 3, June 2009
(pp. 1053–69)
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Abstract

Shocks to the real price of oil may reflect oil supply shocks, shocks to the global demand for all industrial commodities, or demand shocks that are specific to the crude oil market. Each shock has different effects on the real price of oil and on US macroeconomic aggregates. Changes in the composition of shocks help explain why regressions of macroeconomic aggregates on oil prices tend to be unstable. Evidence that the recent surge in oil prices was driven primarily by global demand shocks helps explain why this shock so far has failed to cause a major recession in the United States. (JEL E31, E32, Q41, Q43)

Citation

Kilian, Lutz. 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market." American Economic Review, 99 (3): 1053–69. DOI: 10.1257/aer.99.3.1053

Additional Materials

JEL Classification

  • E31 Price Level; Inflation; Deflation
  • E32 Business Fluctuations; Cycles
  • Q41 Energy: Demand and Supply
  • Q43 Energy and the Macroeconomy